For most businesses, a constant flow of capital is considered almost indispensable. Unfortunately, a firm, corporation, or proprietorship may not always have the liquidity necessary to meet its operating expenses. In such a situation, it becomes necessary to draw on credit. Credit is a fancy word for debt; that is, a situation in which the business takes out a loan and promises to pay it back.
This loan can be unsecured (where the lender trusts the borrower enough that he believes he will pay the amount simply at his word) or secured (where the borrower must pledge an asset of value as collateral which the lender will seize if he fails to repay the amount).
There are various ways to take out a ‘line of credit,’ but the most straightforward way by far is a business credit card. Let’s learn what this novel fintech concept is and how a 5 Star Processing Credit Card works.
What is a Business Credit Card?
Put simply, a BCC (Business Credit Card) is like a standard credit card, but for a commercial business entity instead of an individual. It provides a simple and accessible line of credit for commercial transactions and expenses without going through the complex process of sanctioning loans. They trade in monetary volume for convenience, making them a better choice for short-notice or minor expenditure than bank loans or current account overdrafts.
These credit cards are often maintained not by actual banks but by specialized merchant processors who offer other commercial services to businesses like credit reporting, merchant accounts, advisors and resources, and customs clearing agents. The credit card offers a continuous revolving line of credit taken out and repaid with interest; interest rates on BCCs are usually higher than secured loans because the debts are not backed by collateral. However, collateralized cards are also rapidly gaining a foothold in the market and provide comparable rates to traditional loans.
Transaction Flow of a Business Credit Card
Several card associations issue credit cards; their names are familiar even to the average household, such as Visa or MasterCard. These associations administer their respective payment networks on which their cards operate and provide synergy with each other. An issuer, in this case, the merchant service provider, rolls out credit cards in association with these bodies, which are then issued to the end-user. Transactions are handled through specialized companies called ‘payment processors,’ which liaise with the associations and transmit transactions.
Most business credit cards are linked to merchant accounts maintained by the same provider. When a payment is made using a credit card, the cardholder’s information is accepted by the credit terminal of the merchant receiving the payment and transmitted to their payment processor, who passes it along to the correct card association. The association, in turn, contacts the issuer of the card (in this case, the service provider from whom the BCC has been obtained), who checks the account associated with the card for the ability to accept the transaction. Once the transaction has been verified, the issuer authorizes the transaction, and this authorization is passed to the card association, payment processor, and ultimately the merchant. The transaction is completed.
After this, the settlement process starts; usually, the payments are settled within 12-24 hours. The payment processor accumulates authorized transactions and passes them along to the associations from time to time, who share the details with the issuing banks. The money is transferred between the appropriate accounts, and the transaction is completed based on these transactions.
Benefits of a 5-Star Credit Card Processing
5-Star Processing is a merchant service provider based in the United States of America. They offer a wide range of services to payroll management, transaction processing, and lending support.
These commodities include merchant accounts (for low-risk, mid-risk, and high-risk companies), credit score calculation, credit repair support, web development services, automated salary and human resource management, and, yes, business credit cards.
Accounting and Management Benefits
Especially for small businesses or sole proprietorships, a business credit card allows you to keep your business spending and credit score separate from your own.
Thus, even if you for some reason have a bad credit score or a good credit score you do not want to saddle with debts, a BCC may provide the obfuscation and abstraction you will need to bifurcate your work and life.
The cards also allow you to prevent your employees from drawing into your creditworthiness while still not taking away the business’s opportunity to secure easy credit.
5-Star Processing offers a massive perks program tied to many of their services, especially their credit card. The program allows you to earn points that will unlock various benefits and gifts provided by the company to its dedicated customers.
These include reduced processing rates, more extensive unsecured lines of credit, financial help and resources, improved customer support, and free terminal services. Such an extensive perks framework will guarantee that you continue to be rewarded for utilizing your credit cards.
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Credit Score Generation
A good credit score can go a long way in helping your business off the ground. However, credit scores do not develop unless there has been an appreciable amount of credit-based transactions. Thus, a person who has never taken out a loan in his life will have no credit score and no credit report. This can sound like a good thing, but in reality, it is anything but the lack of a credit score in your background check puts across the message that you’re inexperienced in handling credit and undocumented and unpredictable. This can lead to lenders becoming skittish and asking for higher rates to lend to you. In many ways, a middling credit score can help your prospects more than none at all. A BCC such as one from 5-Star Processing allows you to take out a safe and minimal line of credit that will hopefully not end with you being sued or in jail but with a slowly improving credit report.
Thus, a business credit card can get you set up for smooth sailing in the commercial world, as far as that is possible. With an almost-instantaneous transaction flow capacity, ease of use, and numerous perks to go along with, applying for one can give you the capital infusion you need to expand and execute the diversification project you always wanted.
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